For Those Who Wonder What Next Year Will Be Like…


As this year is coming to an end, I receive calls and emails from a number of organizations requesting me to deliver a presentation on 2023 economic outlook. I will do my very best for them even though it is not easy to anticipate the future events in a world where we don’t know what will happen tomorrow.


Before my presentations, I examine the previous and the latest reports issued by international institutions. Frankly, the gap between the forecasts and the realizations has considerably grown over the course of last eight years, which has been inevitably causing volatility in the markets.


As the gap between the planned or predicted events and those that have actually come true increases, several factors such as resource utilization, employment, production, inflation, and exchange rates are more and more affected by sharp fluctuations. Unforeseen economic events lead to delayed side effects in capital stock and financing and the fact that the solutions created to eliminate them are not realistic enough augments the impact of these fluctuations.


“Turkey’s Export Performance Was The Only Predictable Variable.”


Except for Turkey’s export figures hitting the official targets, all of the government’s forecasts have failed so far. Interestingly, international institutions were also unable to make an accurate forecast. The reason for this may be practices that are claimed to be “heterodox” by the government, which in fact are quite “unorthodox”. Considering the newly announced CGF, the predictions on 2023 so far are likely to undergo some major changes


We know that the CBRT will keep rates stable, but inflation will rapidly decline in 2023 due to the base effect. I think the inflation rate will be around 50% just before the elections. If the government makes the mistake of “associating this decline with interest rate decreases”, the policy rate will hit significantly lower levels in May, which obviously would have devastating effects on exchange rates. I have explained in my previous articles the government’s measures designed to prevent exchange rate from rising. I don’t think these will be enough in 2023. Therefore, I expect the government to introduce a new method to put pressure on the exchange rates. However, as I don’t know exactly what this method will be, I don’t know whether it has a chance of success.


In conclusion, I could say that next year’s inflation will not be below 35%, GDP growth will remain between 3.00-3.50%, unemployment rate will be between 9.5% and 11%, and the current account deficit-GDP ratio will be between 3.50% and 4.50%. However, it is not possible to make a clear forecast about the budget deficit, exchange rates and market interest rates whereas these parameters are the most useful tools in making spot-on projections.